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China’s New Cybersecurity Rules May Block Western Innovation

Critics say the laws will stymie U.S. tech giants working inside the country.
November 7, 2016

China has announced a new set of cybersecurity rules that could make it harder than ever for foreign technology companies to operate in the country.

The rules, announced Monday, will provide central Chinese authorities with greater powers over the monitoring of data and hardware. Notably, the laws will open companies up to far greater scrutiny from the government, demanding that Internet firms coöperate with the state’s criminal investigations and provide full access to data if officials suspect them of wrongdoing. The law also demands that companies demonstrate that their systems are capable of withstanding hacks.

Lu Wei, China's Internet czar (left), speaks with Facebook CEO Mark Zuckerberg and Chinese president Xi Jinping at a meeting in 2015.

The new policies, approved by the Standing Committee of the National People’s Congress and expected to enter force in June 2017, are claimed to be an attempt by China to respond to heightened hacking and terror threats from foreign countries. China has claimed in the past that it’s a frequent target of hacks, and that incidence has been rising. According to Reuters, Yang Heqing, a member of the Standing Committee, said that “as one of the countries that faces the greatest internet security risks, [China] urgently needs to establish and perfect network security legal systems.”

Not that the country is an innocent bystander. While China may have borne the brunt of many attacks, it has also carried out plenty of its own. And while figures suggest that the number of such attacks may have been falling following an agreement made between President Obama and his Chinese counterpart Xi Jinping to cut the rates of cyber espionage, we recently reported that the attacks may simply be getting better.

Then there’s the impact that the new rules will have on Western companies trying to work in China. James Zimmerman, the chairman of the American Chamber of Commerce in China, told Bloomberg that “the Chinese government is right in wanting to ensure the security of digital systems and information here, but this law doesn’t achieve that.” Instead, he warned, it will  “create barriers to trade and innovation.”

Strict regulation is certainly an enemy of technological progress. But tech giants are more likely to be worried about the requirement to open up their data to the authorities. In the past, Yahoo, Google, and Microsoft have all bowed to government pressure in the country, censoring data and sharing it with officials along the way. That met with severe criticism from Congress. In 2010, Google shut down its search efforts in mainland China over censorship and security concerns.

Against the odds, Facebook has so far remained determined to give it a shot in China, even though its site has been blocked since 2009. It remains to be seen if it will be so enthusiastic in the face of the new rules.

(Read more: Reuters, Bloomberg, “Mark Zuckerberg’s Long March to China,” “The Best and Worst Internet Experience in the World,” “The Decline in Chinese Cyberattacks: The Story Behind the Numbers”)

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